What Are Your Dividends For?

Anyone who has been reading this blog knows that the reason I’m living frugally and investing in dividend growth stocks is to hopefully retire young. My target is to “retire” by 40 years old. The reason I put quotations around the word retire is because I’m not quite positive I’ll retire by standard definitions. I think the better phrase to use might be “I want to be financially independent by 40 years old”. I largely want a choice in how I spend the majority of my time. I currently spend most of my time (55 hours a week) working in an environment that isn’t particularly appealing to me, as I have been the last five years. Would I do that if I had a choice? No. So, my dividends are going to provide me a choice…a choice in how I spend my time. I’ll still probably engage in some time of active and paid employment, but it will be something I choose to do and hopefully something I enjoy a great deal more than what I do now. It will also likely be something part-time or seasonal, allowing me freedom to travel cheaply and see family or friends.

I’ve had some readers question why I don’t just quit my job and do something I enjoy now. Well, that’s difficult when you have tenure in a particular career and it pays better than any known alternatives. We are in a period of record unemployment and I’m actually grateful just to have a job. Would I be happier working by the beach serving up Mai Tai’s? I probably would, but I’m not sure how realistic that is right now.

My dream job?

The main reason for me delving into my personal choices for doing what I do is to ask you, the reader, what are your dividends for? What are you trying to achieve with your investments?

The question could be phrased a lot of ways. Why do you invest? Why do you spend your time looking at balance sheets, trying to analyze earnings, revenues, debts, etc? A lot of us investors spend a lot of time trying to pick out what we think are value stocks, that pay a good dividend which will hopefully provide us with a replacement and/or addition to our paycheck. Are you simply trying to supplement your income and appropriately augment your lifestyle or retirement? Are you trying to retire early? Become financially independent? I think it’s important to have a goal in mind when you are investing your hard-earned money. Perhaps you are saving now, so that you can give to charity later. Many people would like to pass on wealth to future generations in the form of an inheritance or trust. I also think some people want a legacy, something to be remembered by. Any reason is a good reason, as long as it fits you and promotes responsible and regular saving/investing.

I think most of us dividend investors are looking to live off our dividends, once a portfolio is large enough. That’s certainly my goal. Most people think living off a pension, retirement portfolio or Social Security is for when you are 65 years old and possibly past your physical prime. I really don’t think it has to be this way. Obviously, Social Security will not be something I’ll draw on until I’m old enough, but I plan to live off my dividend income well before I’m in my 60’s. Do you? Or, are you planning on investing until you are 65 and collecting SS, pensions, etc.?

My dividends will, hopefully, provide me an alternate way to meet expenses. The alternative to paid employment. I’m living very frugally now, limiting my expenses and maximizing my investments and savings. I’m living like no one else will now, so that I can living like no one else can later. My portfolio of dividend stocks is called the Freedom Fund because I hope it provides me the freedom to do what I want in life. Maybe I’ll go on a long road trip, visiting all 50 states. Maybe I’ll go back to school. I could backpack Southeast Asia. But, what I do is beside the point as these are just hypothetical examples. The point is that I value time over money. I’m hoping to unlock and “buy time” with my dividends. Instead of spending 20-30 more years working, I’d like to have my time to myself to spend freely, however I see fit. That’s what my dividends are for.

Comments

Excellent article. I think you are right on. I was wondering if you plan on having enough dividends to be able to spend some and invest the rest. If so, I was curious what sort of numbers or YOC you are looking at in order to reach that goal?

I invest in Equity Income funds & High yield bond funds to generate a powerful flow of dividends, as inflation will have a very healthy appetite for dividends in the decade to come. I will need my dividends to use with SS & other forms of income I will have.I have 9 years left working, then I’m done. Started investing in 1984, wish I had started in 73-74 bear market.

My dividends are for the same reason- to increase options and flexibility.

I’m not really keen on the idea of working for someone else. I’ll gladly work on things I enjoy with others and with supervisors, but having enough income to meet and exceed expenses whether I’m working or not is key to having independence. The more I have, the more I can give, and the more I can focus on what I want to do.

My dividends are definitely for financial independence! When I hit my goal of generating enough annual dividends to cover my most basic living arrangements I will drop to part time work to maintain benefits and ‘extra’ income to continue funding my IRA and 401k.The problem now is defining a balance between living decently and living extremely frugal. I do want some perks.

Boring 2.5% to 4.5% div yld companies are my thing. I maintain 20 to 25 names. Getting close to 10K a yr in dividends. I’ve got another account with mostly cash like investments called the “when all hell breaks loose fund”. I’ll use if a long term emergency happens. In a few yrs I might go out on my own, work a little and cash out one of my companies each year to top up my earnings. Or maybe top up with dividends instead of reinvesting. Not sure yet. I just accumalating for now. On retiring early. I used to be obsesed with it. I found a new job, same industry. I like it here, I don’t think much about retiring any more.

I feel the same about defining a balance between living for the moment and living extremely frugally, saving for the future. There has to be a balance there so that you don’t burn out. I’m constantly trying to strike a balance each and every month. Life is a journey, not a destination…and sometimes I need to remind myself of that.

They are my thing too! 20-25 companies is a great number, and I plan to be in the same boat before I’m done.

$10k/year in dividends is really great. How long have you been investing? I assume you must have somewhere around $300k invested, so I’m guessing you’ve been at it a while? Either way, great work!

I’m happy that you found a calling doing something else…and no longer wish you were retired. I find myself longing for the day I no longer have to go in to my office and instead do something laid back and part-time. Of course, maybe I’ll get lucky like you and find something better in my same industry with the same pay, etc.

Disclaimer

I am not a licensed investment advisor. I am not an investment professional. I am also not a tax professional. This site should be viewed for educational and/or entertainment purposes only. I am not liable for any losses suffered by any parties. Unless your investments are FDIC insured, they may decline in value. Please consult with an investment professional and/or tax professional before investing any of your money. Any transactions I publish are not recommendations to buy or sell any securities.

Privacy Policy

This blog does not collect any personal information except that which is freely shared publicly through comments or other means. This information is not sold or disclosed to other parties for any reasons. I will never sell personal information of any visitors for any purpose.

Disclosure

This blog may have third-party ads served up at any time. I do not make any claims to accuracy of these ads, and these ads do not necessarily represent this blog's views or opinions. There may be affiliate links throughout the blog which are provided by affiliate partners that I may have financial relationships with. I may receive compensation from these affiliate partners if you purchase products using the links in this blog. These affiliate links will be clearly noted where applicable and/or available either directly or by noted as a partner. I may also occasionally publish articles that are paid for by third-party advertisers, and these will be categorized as sponsored posts.